Surgical implants estimated to add $67.5 million to California comp

Legislation before the California legislature would eliminate a controversial loophole that critics say leads to double billing in the workers' comp system. Lawmakers were considering the measure as a new study was released showing the pass-throughs added nearly $67.5 million in medical costs to the system in 2010.

"This estimate is considered conservative as managed care organizations and claims administrators have repeatedly noted the escalating cost of surgical implants and the difficulty in obtaining sufficient documentation to validate actual surgical implant costs," said the report from the California Workers' Compensation Institute. One researcher was quoted as saying the costs could be significantly higher.

The state's medical fee schedule reimburses hospitals at 120 percent of the Medicare rate for certain types of back surgeries performed on injured workers, plus separate fees for the surgical instrumentation used -- even though Medicare already factors in the hardware costs in setting its rates, according to the CWCI. The institute had previously said the injured worker cases had the highest average number of implant-related procedures, and estimated that in 2008 the duplicate fees added $55 million to hospitals.

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The CWCI noted several studies have addressed the issue in recent years, including the following:

Research from 2001 estimating that separate payments for implantable hardware on back surgeries would generate between $7.1 and $28.6 million in additional costs to the workers' comp system.
A 2003 study by RAND concluding that the pass-through allowance was resulting in double payment for the associated hardware and instrumentation, and that the separate pass-through allowance was unnecessary.
A 2005 report prepared for the California Commission on Health and Safety and Workers' Compensation saying workers' comp spinal surgeries were less costly than those of Medicare patients and had a shorter length of stay. This report also found substantial variation in utilization rates for spinal implants among participating hospitals, indicating some implant overuse, and supporting the notion that increased reimbursement encourages overutilization.

For the latest study, CWCI researchers reviewed discharge data from the Office of Statewide Health Planning and Development and estimated that 3,350 of the 2010 back surgeries involved hardware that made them eligible for the duplicate payments. The average implant payments for the spinal hardware pass-throughs were estimated at $20,137 per discharge.

The proposed legislation, S.B. 959, would delete the reimbursement specifications relating to implantable medical devices, hardware, and instrumentation.

Read more at the WorkersComp Forum homepage.

July 19, 2012

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